Foreign investor outflows at NSE hit over Sh3 billion in quarter one

Money Markets

Investment brokers on the trading floor of the Nairobi Securities Exchange. Foreign investor outflows hit Sh3bn. PHOTO | FILE 

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com
In Summary

• Equity Bank and Safaricom led the list of counters with the largest net outflows in the quarter, with the telco seeing increased profit taking in March as its price climbed steadily to reach the Sh17 level by the end of the month.
• Foreign investors may also be trading cautiously in the Kenyan market given that there is still some conflict concerning the levying and mode of collection of capital gains tax.

Foreign investors moved a net of Sh3.16 billion from the NSE in the first quarter of the year, according to data from Standard Investment Bank (SIB), largely on profit taking.

This was the first net quarterly outflow registered by foreign investors since the corresponding first quarter of last year, when the net outflows stood at Sh3.02 billion.

The last three quarters of 2014 all saw net inflows from foreign investors, leading to a full year net inflow position of Sh7.7 billion.

Equity Bank and Safaricom led the list of counters with the largest net outflows in the quarter, with the telco seeing increased profit taking in March as its price climbed steadily to reach the Sh17 level by the end of the month.

March alone accounted for the bulk of the quarterly net outflows at Sh3.1 billion, with foreign investors in Equity Bank selling a net of Sh1.35 billion worth of shares and Safaricom’s selling off shares worth Sh950.4 million during the month.

“This could be attributed to a bit of profit taking. Looking at Equity Bank from where it was last year, we can see it has also done well in share price gain, and the investors may have been waiting to see out the full year results before selling,” said SIB analyst Eric Musau.

Other counters that saw high net outflows during the quarter include British American Tobacco (BAT), whose foreign investors took out Sh382 million, ARM Cement which had net outflows of Sh276 million and Bamburi whose net outflows stood at Sh197 million.

Kenya Commercial Bank, Cooperative Bank and Kenya Power registered the highest net foreign inflows during the quarter, at Sh545.3 million, Sh433.7 million and Sh200 million respectively.

“These funds are being redistributed across other portfolios in the Kenyan market especially companies set to pay dividends after announcing results, hence the foreigners would be interested in locking their funds in those counters until the book closure dates,” said Genghis Capital analyst Mercyline Gatebi.

According to Mr Musau, foreign investors may also be trading cautiously in the Kenyan market given that there is still some conflict concerning the levying and mode of collection of capital gains tax.

READ: Treasury shifts the capital gains tax burden to investors

Some analysts argue charging the tax on non-resident foreign investors may affect portfolio inflows, especially considering this category of investor is not charged the tax in other regional markets.

“On the macro-economic side as well, stability has returned to Egypt, and some wary investors who kept their funds earmarked for Egypt temporarily in markets like Kenya may be redirecting funds there. Nigeria is also stabilising and may pull in some funds from April,” said Mr Musau.

Kestrel Capital analyst Linet Muriungi, in the Kenya Macroeconomic and Equities Outlook for 2015, however identifies the upcoming derivatives and REITs markets as likely to attract foreign inflows in the medium term.

“We believe these alternative investment instruments will deepen the equities market and attract higher portfolio flows into the market in the medium term,” said Ms Muriungi.